For the southwestern Chinese city of Kunming, Beijing’s plan to extend a high-speed rail link 3,000km south to Singapore is already a boon, bringing pristine expressways, a gleaming station and something of a real-estate boom, as young buyers crowd property showrooms.
In Laos, work has yet to start on what should be the first overseas leg of a rail line stretching throughout Southeast Asia. The country, one of the region’s poorest, could struggle to finance even part of the US$7 billion cost and has yet to agree financial terms with China.
From Laos, the railway would enter Thailand. However, Beijing’s negotiations have soured there as well, in part over financing, adding to a growing headache for China and highlighting the sort of problems Beijing might face as it develops its economic highways beyond Southeast Asia and across Asia under its “One Belt, One Road” initiative.
Photo: Reuters
The ambitious plan to build land, sea and air routes reaching across the continent and beyond was announced by Chinese President Xi Jinping (習近平) in 2013 with the aim of boosting trade by US$2.5 trillion over the next decade. As China’s economic growth slows, Beijing is encouraging its companies to win new markets overseas.
However, across its Southeast Asian border, China is facing the most complex and possibly most significant obstacles to its ambitions, as its neighbors protest what they say are excessive Chinese demands and unfavorable financing conditions.
They have resisted Chinese demands for the rights to develop the land either side of the railway.
Beijing says turning a profit on land development would make the rest of the project more commercially viable and allow it to make a greater upfront financial commitment.
In addition, Myanmar had environmental concerns and canceled its part of the project in 2014.
For China, Southeast Asia’s concerns are “going to be the first significant hurdle as they implement One Belt, One Road,” said Peter Cai, a research fellow at Lowy Institute for International Policy in Sydney.
The Chinese Ministry of Foreign Affairs and the Export-Import Bank of China did not respond to requests for comment.
In 2013, all signs pointed to fast completion of the Laos leg. Leaders from both countries agreed to speed up construction — China offered to loan most of the project funds. In November that year, construction on the line’s terminus in Kunming began.
The 2.1 billion yuan (US$319.8 million at current exchange rates) high-speed rail station in Kunming is now months from opening. However, there is no action in Vientiane despite an elaborate groundbreaking ceremony in December last year.
Without significant help from China, Laos lacks the financial muscle for the project, diplomats said.
It is unclear why China, which has been vying with Vietnam for influence in Laos, could not offer terms acceptable to Vientiane.
Both countries are invested politically in the scheme. China aims to increase its reach and influence in Southeast Asia and Laos says it wants to turn its country into one that is land-linked, rather than landlocked.
“There were very high-ranking dignitaries from both sides at the signing,” a Western diplomat in Vientiane said. “Most people believe it will cost more than US$7 billion, and Laos is struggling to even finance US$2 billion of that.”
The Laos government did not respond to a request for comment for this story.
However, diplomats said the inaction reflected an internal rift in the Lao People’s Revolutionary Party over how the negotiations with China were handled.
They said a shock decision in January by the politburo to exclude Laotian Deputy Prime Minister Somsavat Lengsavad from the top decisionmaking body in part indicated concern at senior levels that the deal’s terms were too favorable for China.
Somsavat had led negotiations on China-related projects and had faced internal criticism for being too pro-Chinese.
“The terms were good for Laos,” Somsavat told reporters.
Construction was delayed because Laos was still “researching some details” and because of local opposition to land issues, he said.
Holding the ground-breaking ceremony on Dec. 2 last year also raised eyebrows in the leadership because the date clashed with celebrations marking the 40th anniversary of the founding of the Laos People’s Democratic Republic, diplomats said.
With Somsavat out of the government “moves internally by the Laos government have been to renegotiate the terms of this rail agreement,” a diplomat said.
China has offered at least US$30 billion in loans and credit lines for projects.
Zhao Jian (趙堅), a transportation professor at the Beijing Jiaotong University, said China offers concessionary loans of between 2 percent and 7 percent, so any country pushing for cheaper loans was being “unrealistic.”
Still, infrastructure projects like these need to be subsidized, said Kamalkant Agarwal, the head of commercial banking at Thailand’s Siam Commercial Bank.
“You can build these projects if you have a government or Santa Claus to pay for it,” he said. “But otherwise, making these projects profitable is a huge challenge.”
After failing to bridge gaps on financing, investment and costs, Thai Prime Minister Prayuth Chan-ocha told Chinese Premier Li Keqiang (李克強) at a meeting in Hainan in March that Thailand would go it alone on financing and for now build only part of the project.
The Thai line would stop well short of the Laos border.
“They will have to invest more because this is a strategic route that will benefit China,” Thai Transport Minister Arkhom Termpittayapaisith told reporters earlier this year.
Thailand refused Chinese requests to develop land along the railway route.
“I have said since day one with China, that there will be no offer on land rights,” Arkhom said.
Thai Ministry of Finance sources said the country could secure funds from Japan at much lower rates. Japan is Thailand’s biggest investor but also a country jostling with a more assertive China for influence across Asia, so Beijing would be wary of this idea.
“The ministry does not want to be condemned for borrowing an expensive loan compared with other options to support this project,” said a Thai Ministry of Finance official who attended some negotiations with China.
Some Chinese local officials, for their part, see the delays as Southeast Asian dithering.
“We are the face to Southeast Asia,” said Sun Xiaoqiang, vice-director of the Kunming Investment Promotion Board. “Of course, we all hope they will build faster.”
The gap between China and Southeast Asia is clearest on the streets of Vientiane and Kunming.
Hundreds of Chinese firms operate in Laos, including Wan Feng Shanghai Real Estate, which is building a US$1.6 billion project to supply Chinese expatriates with condominiums and shopping centers.
However, the Laotian government has invested little in new rail and roads.
Billions of dollars have poured into Kunming, including the district surrounding the new rail station — described by the World Bank six years ago as a “ghost town.”
Nearly half of China’s major cities are suffering “moderate to severe” levels of subsidence, putting millions of people at risk of flooding, especially as sea levels rise, according to a study of nationwide satellite data released yesterday. The authors of the paper, published by the journal Science, found that 45 percent of China’s urban land was sinking faster than 3mm per year, with 16 percent at more than 10mm per year, driven not only by declining water tables, but also the sheer weight of the built environment. With China’s urban population already in excess of 900 million people, “even a small portion
UNSETTLING IMAGES: The scene took place in front of TV crews covering the Trump trial, with a CNN anchor calling it an ‘emotional and unbelievably disturbing moment’ A man who doused himself in an accelerant and set himself on fire outside the courthouse where former US president Donald Trump is on trial has died, police said yesterday. The New York City Police Department (NYPD) said the man was declared dead by staff at an area hospital. The man was in Collect Pond Park at about 1:30pm on Friday when he took out pamphlets espousing conspiracy theories, tossed them around, then doused himself in an accelerant and set himself on fire, officials and witnesses said. A large number of police officers were nearby when it happened. Some officers and bystanders rushed
HYPOCRISY? The Chinese Ministry of Foreign Affairs yesterday asked whether Biden was talking about China or the US when he used the word ‘xenophobic’ US President Joe Biden on Wednesday called for a hike in steel tariffs on China, accusing Beijing of cheating as he spoke at a campaign event in Pennsylvania. Biden accused China of xenophobia, too, in a speech to union members in Pittsburgh. “They’re not competing, they’re cheating. They’re cheating and we’ve seen the damage here in America,” Biden said. Chinese steel companies “don’t need to worry about making a profit because the Chinese government is subsidizing them so heavily,” he said. Biden said he had called for the US Trade Representative to triple the tariff rates for Chinese steel and aluminum if Beijing was
Beijing is continuing to commit genocide and crimes against humanity against Uyghurs and other Muslim minorities in its western Xinjiang province, U.S. Secretary of State Antony Blinken said in a report published on Monday, ahead of his planned visit to China this week. The State Department’s annual human rights report, which documents abuses recorded all over the world during the previous calendar year, repeated language from previous years on the treatment of Muslims in Xinjiang, but the publication raises the issue ahead of delicate talks, including on the war in Ukraine and global trade, between the top U.S. diplomat and Chinese